Fit for purpose? The extent and enforcement of international trade agreement labor obligations after the guatemala - labor obligations decision

• Author: Kevin Banks
• Position: Associate Professor of Law, Queen's University, B.A. and LL.B. (University of Toronto), S.J.D. (Harvard)
• Pages: 639-677

FIT FOR PURPOSE? THE EXTENT AND

ENFORCEMENT OF INTERNATIONAL TRADE

AGREEMENT LABOR OBLIGATIONS AFTER THE

GUATEMALA –LABOR OBLIGATIONS DECISION

KEVIN BANKS*

ABSTRACT

This Article considers how far labor obligations in trade agreements extend

into state regulation of national economies, and more specifically what it means

for state action or inaction to be “in a manner affecting trade”so as to engage

those obligations. This question is key to defining what potential issues labor

chapters aim to address. It was central to the first trade dispute in the world

involving labor obligations to be resolved by a dispute settlement panel, the

Guatemala – Labor Obligations case. The panel’s decision was followed by

agreement on a definition of this phrase in the revamped labor chapter that was

key to reaching the new United States-Canada-Mexico Agreement. This

definition may in turn have implications for the interpretation of many earlier

trade agreements to which the United States is party. The literature to date

treats the definition as correcting an interpretation in Guatemala – Labor

Obligations that critics contend made proof of violation, and thus enforce-

ment, unworkable. This Article maintains that this account is inaccurate, and

that the extent of labor obligations in U.S. trade agreements can only be under-

stood by more fully grasping their purposes, something about which the parties

and the panel in Guatemala – Labor Obligations had relatively little to say,

and which remains unsettled in policy debate and the academic literature. The

Article develops a theory of labor obligation purposes that accounts well for their

wording and structure and explains how the USMCA labor chapter may set

normative ground rules for an integrated economic space to address systemic

labor rights problems, rather than simply prohibiting and remedying particular

* Associate Professor of Law, Queen’s University, B.A. and LL.B. (University of Toronto),

S.J.D. (Harvard). I served as Chair of the Panel that delivered the Report in Guatemala – Labor

Obligations. In this Article I speak neither for other Panel members, nor for the Panel itself. The

Panel is functus officio. Nor should anything that I say in this paper be considered indicative of the

Panel’s deliberations. It is not. I cannot and would not disclose such matters, as the Code of

Conduct for Panel members prevents me from doing so. These are my own personal views,

developed quite some time after the release of the Panel’s Report. The Report should and must

speak for itself in regard to the interpretation and application of the obligations in issue to the

facts established in the evidence before it. I wish to thank Professors Valerie Hughes, Kevin

Kolben and Nicholas Lamp for insightful comments on earlier drafts, and John Wilkinson for

helpful research assistance. Any errors remain mine. V

C2021, Kevin Banks.

639

failures to uphold labor rights with material effects on trade. With these pur-

poses in mind, it might be arguable that labor chapters in previous agreements

have an extent of obligations similar to that of the USMCA.

I. INTRODUCTION .................................... 641

II. THE GUATEMALA –LABOR OBLIGATIONS DECISION’SDEFINITION OF

OBLIGATIONS...................................... 645

A. “Not Fail to Effectively Enforce”.................... 646

B. “Sustained or Recurring Course of Action or Inaction”.... 646

C. “In a Manner Affecting Trade”.................... 647

III. THE WORKABILITY OF PROOF OF VIOLATION ................ 650

A. Sustained or Recurring Course of Action or Inaction ...... 650

B. In a Manner Affecting Trade ...................... 653

C. Addressing Difficulties of Proof Through Procedural

Reform ...................................... 656

D. Conclusions .................................. 659

IV. TOWARDS A CLEARER ARTICULATION OF PURPOSES AND EXTENT OF

OBLIGATIONS...................................... 659

A. What the Guatemala – Labor Obligations Report Said

(and Did Not Say) About the Purposes of the CAFTA-DR

Labor Chapter ................................. 661

B. Relating Purpose and Extent of Obligations: Accounting for

the Moral and Policy Significance of Labor Rights in Trade

Relationships and Agreements ...................... 662

1. Prohibiting and Remedying Particular Breaches of

Fair Conditions of Competition............... 671

2. Establishing or Maintaining Systemic Conditions of

Fair Competition .......................... 671

3. Establishing a Fairness Framework as a

Precondition for Closer Economic Ties......... 672

C. Reflections on the Language of Current and Future

Agreements ................................... 674

V. CONCLUSION ...................................... 677

GEORGETOWN JOURNAL OF INTERNATIONAL LAW

640 [Vol. 52

I. INTRODUCTION

The political acceptability of free trade agreements in the United

States increasingly depends on the effectiveness of their labor obliga-

tions.

1

This in turn depends upon which potential issues or problems

those obligations can reach and address, and how well agreement pro-

cedures enable the parties to ensure compliance with them. According

to the wording of most U.S. trade agreements, how far many labor obli-

gations extend into state regulation of national economies depends on

what it means for state action or inaction to be “in a manner affecting

trade.”

2

This question was central to the first trade dispute in the world

involving labor obligations to be resolved by a dispute settlement panel,

Guatemala – Issues Relating to the Obligations Under Article 16.2.1(a) of the

CAFTA-DR (Guatemala – Labor Obligations).

3

The panel report in that

case stands to influence how dispute settlement panels interpret the

similarly worded obligations found in many other trade agreements,

1. KIMBERLY ANN ELLIOT,DEVELOPING A MORE INCLUSIVE US TRADE POLICY AT HOME AND

ABROAD, 18–21 (2019), https://www.cgdev.org/sites/default/files/developing-more-inclusive-us-

trade-policy-home-and-abroad.pdf.

2. U.S.-Australia Free Trade Agreement, U.S.-Austl., art.i 18.2, May 18, 2004, T.I.A.S. 6422,

https://ustr.gov/trade-agreements/free-trade-agreements/australian-fta/final-text; U.S.-Bahrain

Free Trade Agreement, U.S.-Bahr., art. 15.2, Sept. 29, 1999, T.I.A.S. 13065, https://ustr.gov/

trade-agreem ents/f ree-tr ade-ag reemen ts/ba hrain- fta/fin al-tex t; U.S.- Chile F ree Trad e

Agreement, U.S.-Chile, art. 18.2, June 6, 2003, U.S.I.T.C. 3605, https://ustr.gov/trade-

agreements/free-trade-agreements/chile-fta/final-text; U.S.-Colombia Free Trade Agreement,

U.S.-Colom., art.17.3, Nov. 22, 2006, 125 Stat. 464, https://ustr.gov/trade-agreements/free-trade-

agreements/colombia-tpa/final-text; Agreement Between The United States of America and the

Hashemite Kingdom of Jordan on the Establishment of a Free Trade Area, U.S.-Jordan, art. 6.4,

Oct. 24, 2000, I.L.M. 41(1), https://ustr.gov/trade-agreements/free-trade-agreements/jordan-fta/

final-text; U.S.-Korea Free Trade Agreement, U.S.-Kor., art. 19.3, June 30, 2007, 125 Stat. 428.,

https://ustr.gov/trade-agreements/free-trade-agreements/korus-fta/final-text; U.S.-Morocco Free

Trade Agreement, U.S.-Morocco, art. 16.2, June 15, 2004, 118 Stat. 1103, https://ustr.gov/trade-

agreements/free-trade-agreements/morocco-fta ; U.S.-Oman Free Trade Agreement, U.S.-Oman,

art. 16.2, Jan.19, 2006, 120 Stat. 1192, https://ustr.gov/trade-agreements/free-trade-agreements/

oman-fta/final-text; U.S.-Panama Free Trade Agreement, U.S.-Pan., art. 16.3, June 28,2007, 125

Stat. 497, https://ustr.gov/trade-agreements/free-trade-agreements/panama-tpa/final-text; U.S.-

Peru Free Trade Agreement, U.S.-Peru, art. 17.3, Apr. 12, 2006, 121 Stat. 1455, https://ustr.gov/

trade-agreements/free-trade-agreements/per u-tpa/final-text; U.S.-Singapor e Free Trade

Agreement, U.S.-Sing., art. 17.2, May 6, 2003, 42 I.L.M. 1026, https://ustr.gov/trade-

agreements/free-trade-agreements/singapore-fta/final-text.

3. Guatemala – Issues Relating to the Obligations Under Article 16.2.1(a) of the CAFTA-DR (June 14,

2017) (Banks, Posner, Hernandez, arbs.)[hereinafter, Final Report]. Dominican Republic-Central

American United States Free Trade Agreement (CAFTA DR), Aug. 5, 2004, 43 I.L.M. 514,

https://ustr.gov/trade-agreements/free-tr ade-agreements/cafta-dr-dominican-republic- central-

america-fta/final-text.

FIT FOR PURPOSE?

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